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CUNA supports delay in UBIT accounting guidance

WASHINGTON (1/23/07)—There is too much confusion surrounding the Financial Accounting Standards Board’s (FASB’s) Interpretation 48 (FIN 48) for nonpublic entities and the issues involved to proceed with an original effective date, said the Credit Union National Association (CUNA) in a comment letter. FIN 48 is applicable to unrelated business income taxation (UBIT) for state-chartered credit unions and provides direction on how to financially recognize such tax when there is a question regarding the amount of the tax liability. It is also important to many CUSOs, which are subject to state and federal tax. The CUNA letter was in support of a recommendation by FASB’s own Private Company Financial Reporting Committee (PCFRC) that the effective date be delayed. Scott Waite, chairman of CUNA’s Accounting Task Force, noted a recent PCFRC survey on how FIN 48 would apply in situations in which the UBIT tax liability has not fully been determined. CUNA publicized the survey through its online news service, News Now, and encouraged affected credit unions nationwide to respond to the survey by a January 31st deadline. “In light of the FASB's own questions regarding the application of FIN 48 as well as the uncertainty of credit unions and accounting professionals, we strongly support the proposed delay in the effective date of FIN 48,” wrote Waite in the Jan. 18 letter. Waite is SVP/CFO of Patelco CU, in San Francisco, as well as a member of FASB’s Financial Accounting Standards Advisory Council and its Small Business Advisory Committee. Waite highlighted credit union concerns that the qualifications for a deferral in FSP 48-b were not very clear. For instance, he said, FSP 48-b assumes the adoption of FIN 48 if previously prepared GAAP financial statements have been provided to third parties. “We believe FASB has not provided sufficient guidance regarding which entities are included in the term, ‘third parties.’ For example, we believe that if a credit union has provided required statements that conform to GAAP to its regulator but has not adopted FIN 48, then it should, as a result, be entitled to the deferral," Waite told News Now Tuesday. The UBIT issue was in the news spotlight last week when Community First CU filed a complaint in federal court challenging the Internal Revenue Service (IRS) on its determinations that certain insurance products offered to members fall outside the credit union's main mission and are subject to the tax. Community First, based in Appleton, Wisc., seeks a refund of taxes paid on income from several insurance products. The credit union said at issue is about $54,000 in taxes it paid in 2006 on income from the sale of credit life and credit disability insurance, and guaranteed auto protection (GAP) insurance. Use the resource link below to access CUNA’s complete comment letter.